Hungary's new government confronts a critical deadline to unlock billions in frozen European Union funds, with €10.4 billion in post-pandemic recovery grants and loans at stake unless the country can demonstrate compliance with 27 anti-corruption milestones by August 31. The financial pressure comes as the nation's economy has stagnated and its government deficit spirals, according to economist László Andor, formerly Hungary's EU commissioner from 2010-2014.
Péter Magyar was sworn in as Hungary's prime minister on Saturday, pledging to reverse years of democratic backsliding and launch "a new chapter" in the country's history. Magyar said Hungarians had given his party a mandate to change the system. The new government, described as an experienced technocratic team, signaled a new direction in Hungary's relationship with the EU.
The Frozen Funds Challenge
The most critical funds are €10.4 billion in grants and cheap loans allocated under the EU's post-pandemic recovery fund that were never paid out over concerns about the rule of law and financial probity under Viktor Orbán. Later this month, Hungary is expected to produce a new plan showing how it can meet the recovery fund's goals of making the country greener and more digital, while completing 27 "super milestones" to tackle corruption and ensure the independence of the judiciary.
Andor said the new government would have to "move mountains" to meet that deadline. "In order to avoid at least a temporary recession and start a new cycle of public investment, [gaining the frozen funds] is absolutely vital," he said. "It's also very important that the new government avoids starting with an experience of a recession, which would obviously be to the detriment of its reputation and competence."
A further €7.6 billion in EU development funds remains blocked over the previous government's conflicts with EU law, including anti-LGBTQ+ legislation, but there is no imminent risk of losing that cash. Budapest's access to €16.2 billion in cheap loans for defence projects under the EU's Security Action for Europe programme is also at stake.
Economic Transformation and Euro Adoption
Finance minister András Kármán outlined an economic transformation plan aimed at meeting the criteria for adopting the euro by 2030. The ambitious timeline reflects the new government's commitment to deeper European integration, though Andor noted that Hungary's economy has stagnated over the last four years.
Foreign minister designate Anita Orbán said, "Hungary's place is in Europe; naturally, firmly and without question." Soon after, Hungary dropped its long-standing veto over sanctions against violent Israeli settlers.
Legal and Constitutional Hurdles
Before taking the oath of office, justice minister Márta Görög pledged to revise Hungary's anti-LGBTQ+ law after the European Court of Justice ruled it was discriminatory and in breach of basic democratic values. "Hungary is a member of the European Union, which means that there are responsibilities," she said.
Zselyke Csaky at the Centre for European Reform thinktank said both Brussels and Budapest would have to tread carefully over hitting deadlines. She said that while Magyar has a parliamentary majority to rewrite the constitution, rushing major changes would feel too much like the previous administration: "It is just not a good look if a constitutional amendment is pushed through without much consultation, so that's basically the limiting factor in Hungary's case."
The European Commission has shown flexibility in its reading of the EU's financial rules, but it has also faced criticism from the ECJ for lack of transparency and for "incorrectly" making an earlier decision to release €10 billion to Hungary.
Political Realignment
Beyond EU funds, it remains to be seen how Magyar will govern, including whether he will be a prime minister for his core conservative voters or create a big tent for left-liberals who voted for him to get rid of Orbán. For the first time since 1990, left of centre and liberal parties are absent from the Hungarian parliament after major opposition parties chose not to run in order to ensure Orbán's defeat.
In his first speech as prime minister, Magyar apologized to everyone who had been maligned by the state during Orbán's 16-year rule. Richárd Barabás, co-leader of Párbeszéd-Greens, said there had been great unity among Hungarians to say "no to this kind of authoritarianism, no to this kind of Russian alliance, no to this kind of infringement of human rights" that Orbán's 16-year reign embodied.
Barabás said there was a need to debate issues such as European federalism, the integration of Ukraine into the EU and the phase out of Russian oil and gas from Hungary's energy mix. Barabás wants to phase out Russian fossil fuels as soon as possible, favouring the EU's end of 2027 target, while Magyar has proposed a 2035 deadline.
Speaking the day before Magyar was sworn in, Barabás congratulated him for his "really great job" in winning the elections and triumphing over the "severe" and "disgusting" smear campaign from the previous government. "We really wish him luck as prime minister to be able to fulfil all the expectations and requirements proposed by the commission for him, because Hungary really needs the EU funds to come back," he said.
Why This Matters:
Hungary's ability to meet the August 31 deadline will determine whether the country can access critical funds needed to avoid recession and restart public investment in a stagnating economy. The €10.4 billion in recovery funds represents substantial capital that could stabilize Hungary's spiraling deficit without additional taxpayer burden. However, the 27 anti-corruption milestones and judicial independence requirements demand significant institutional reforms that may prove difficult to implement rapidly. The new government must balance the urgency of economic recovery against the risk of appearing to rush constitutional changes without proper consultation—a concern that reflects lessons from the previous administration's approach. The outcome will test whether market-oriented reforms and fiscal discipline can be achieved while navigating EU bureaucratic requirements, and whether Hungary can secure its economic future through compliance rather than confrontation with Brussels.